Wednesday, March 23, 2011

We all know that this president when he served in the Illinois senate voted "present" more times than not. It was as though he did not want to offend anyone. It should not be surprising that he is doing the same as president. He has not taken the lead on any domestic issue or on any foreign one either, in essence voting present. I previously wrote that he did the same on his NCAA bracket, picking only the higher seed teams to advance. I am reminded of what Bess Truman said when asked about Jimmy Carter's indecisiveness during the Iran hostage crisis. Asked what would Harry do her response was "I don't know but he would have done something." The same can be applied to Obama and contrast this with Reagan who responded to the hostage crisis by generating one of his own Iran-Contra. Well at least he did something. To illustrate the magnitude of the presidency, there are a myriad of domestic problems. But there are also a myriad of foreign problems and on all of them the president is uniformly silent. Here are the current world flashpoints that are in the news most every day. We expect the president to be conversant on all of these but he is conversant on none. Obama is the know nothing, do less president.

Condemning the moderate Arabs for not openly criticizing the radical ones reminds me of the silence of the vast majority of whites regarding the Klan pre and during the civil rights movement. Speaking out against the Klan had serious consequences throughout the south. You could be shot. Your house could get burned down. Your family could be harassed. You could get fired because of pressures placed on your boss and on your job. Sounds familiar? It is exactly what is happening now amongst the moderate Arabs. Their silence is understandable.

The left and the right are united on their criticism of subprime mortgages. The right rails that the lenders were forced to lend to unqualified borrowers by the federal government. Nothing could be further from the truth. The left is against subprime mortgages because they are mostly credit slobs feeling that the underserved should not be allowed to borrow even if they desire it at rates the left deems as usurious. Of course these rates are risk based and if they were lower, the borrowers would be forced into the arms of less scrupulous lenders. But that is just too bad. So the fed has come out with rules that essentially end subprime lending. Under these rules the 80 percent of subprime borrowers who are current on their loans would have been denied credit. So what should be a success story of increasing home ownership and after the mortgage collapse has recovered will build wealth in our most challenged households is damned as a failure. Students making 80 percent on my exams would certainly not deem themselves failures and why we persist in saying this canard about subprime borrowers is a shame.

I just heard a commercial about a couple asking the geico lizard to marry them. I thought is the lizard bisexual? Why in the world would anyone want to marry a lizard? Then the rest of the commercial said that the couple wanted the lizard to perform their vows which makes about as much sense as marrying them in the first place.

What happened to the weekly body counts from Iraq and Afghanistan that we got on the major news networks and in the press? It seems that they were only interested in the counts when Bush was president.

Obama is still at war in Iraq and Afghanistan and has now taken us bumbling and stumbling into Libya. What happened to the peace movement? Why are the usual suspects not out there sounding like the protestors in Wisconsin? Where have they gone?

And of course you have noticed that the press did not say anything bad about the boarish protestors in Wisconsin because they were on the left. Not a word was said about their wanton destruction of property or about the tea party members who volunteered to clean it up. Yet a single anti-Obama poster can appear at a tea party rally and it makes every newspaper and every broadcast. Not hard to go figure who is biased.

Where is the feminist support for George Bush and his liberation of millions of women in Iraq and Afghanistan? Again silence. It is as if the support for their sisters takes a back seat to their politics.

The left and the right are confused about the "fair tax". It is supported by members on the right who brook no disagreement even though the flat tax is far superior. Attacks against the fair tax are greeted by the right like attacks against abortion "rights" are with the left. Yet the "fair" tax is a leftist tax embraced as the value added tax in the same European countries that the left so admires and the right so abhors. Yet in this country the left does not embrace the "fair" tax and the right does. Go figure.

Thursday, March 17, 2011

I am certainly not a presidential historian but Obama is likely to be noteworthy as one of the most – if not the most – disengaged president in history. He was chided for playing golf, hosting a private Stevie Wonder concern in the White House and leaving for a trip during the Libyan revolt and the Japanese earthquake. One wonders about the quality of his advisors or if he is even heeding advice. Of course his advisors are arguably among the worse who have occupied those positions. Austan Goolsbee, Valarie Jarrett, Hilliary Clinton, Kathleen Sebelius, Janet Napolitano and Stephan Chu are all less able than their predecessors in the prior administration. Perhaps only Susan Rice is up to the task. Obama was also roundly chided on the talk shows for filing out an NCAA bracket as well. Personally, if he played golf, hosted a concert and filed out a bracket as respites for working hard no one would take him to task. But no one could accuse this president for working hard. Its more like hardly working. It is hard to find even one example of presidential leadership. Even the health care bill is attributed to Henry Waxman. There was even fodder for criticism in his NCAA brackets – although this is a point missed by the talk show hosts. Obama always picked the higher seeds! Who does that? Obama is supposed to be an expert on basketball, yet all of us know that there are always spectacular upsets during the tournament. In fact, only in 2008 did all first seeds make it to the men’s final four. Yet this is the second year that Obama has predicted no upsets. It is as if the president did not want to get fan bases mad. In a way this is also indicative of his lack of leadership.

We face many challenges as a country, but after four years in Washington and a lifetime in business, I believe unsustainable spending habits and fiscal insolvency pose the greatest threat to our economic stability, freedom, way of life and future as a nation. We are in real danger of becoming the first generation of Americans to leave our country in worse shape than we found it. Consider:

· In 2009 the federal government spent $1.4 trillion more than it took in, borrowing nearly 40 cents of every dollar.
· The gap between spending and revenue is almost four times the historical average. Even when we reach historical revenue levels, we are still projected to be spending nearly six percent more of our gross domestic product than we take in, and the gap will continue to widen.
· By 2035, on our current trajectory, our debt will reach 185 percent of GDP, a situation that economists and analysts of every persuasion deem as disastrous. If this occurs, interest payments on our debt, half of which goes to foreign countries, will reach nearly nine percent of GDP – as much as we currently spend on national defense, education, roads, and all government agencies combined.
In 43 presentations throughout Tennessee during the fall, I presented this information and shared my plans to introduce legislation to cap spending at a sustainable level, force Congress to make tough choices and incentivize economic growth. The result is the Commitment to American Prosperity Act, the “CAP Act.”

(2) If Congress fails to meet the annual cap, require the Office of Management and Budget to make evenly distributed, simultaneous cuts throughout the federal budget to bring spending down to the pre-determined level. Only a two-thirds vote in both houses of Congress could override the binding cap, and

(3) For the first time, eliminate the deceptive “off-budget” distinction for Social Security – providing a complete and accurate assessment of all federal spending.

Washington continues to borrow and spend, and despite the pleas of the American people, there is no end in sight. As we approach our debt limit of $14.29 trillion and more and more Americans – Republicans, Democrats and Independents – call on Washington to get spending under control and reduce our deficit, I see no better time to change course. What Senator McCaskill and I are offering is a legislative straitjacket, a way of forcing Congress to dramatically cut spending over 10 years. The beauty of the CAP Act is that it imposes fiscal discipline and smaller government, while incentivizing lawmakers to pass policies that promote economic growth.

Cutting trillions of dollars from the federal budget in the coming years won’t be easy or painless; it will require backbone and discipline on the part of policy makers and shared sacrifice for the country. I believe Americans are willing to make short-term sacrifices for the long-term good of our country and demand commensurate actions from their elected officials.

To find out more about the CAP Act, please visit my Web site at www.corker.senate.gov. If you have any questions for me on this or another topic, please do not hesitate to contact my office.

Tuesday, March 15, 2011

The other night there was an NBA game between El Heat and Los Spurs. Aside from showing no knowledge of Spanish it was part of an NBA promotion called Noche Latina. The objective is to increase marketing to the Hispanic communities in selected NBA markets. The first question is why? There are relatively few Hispanic players. Pau Gasol and his brother Marc are from Spain but in this country "Hispanic" generally refers to a person from Latin America. This should rule out the Lopez brothers (Brook and Robin) who are Californians. I seriously doubt if there are even enough Latinos to make up an NBA team. But marketing never sleeps so we have Nueva York, Los Spurs, El Magic, Los Bulls, Los Mavs, El Heat,Los Lakers, Los Suns, Los Bulls and Los Rockets. Why leave the last name English? This really escapes me and the jerseys simply look like a product of our public school system. So I was thinking that since most of the NBA players are black, that we should market to black communities during black history month with black slang. We could have the New York Crooklyns, the San Antonio Roosevelts, The Orlando Twights, the Boston Redbones, the Chicago Bangers, the Miami Benz, the Dallas Crew, the Los Angeles Booyas, the Phoenix Grills, the Houston Buttas, and the Atlanta Playas.

Sunday, March 6, 2011

First, there has been the threat of a government "shutdown" that is not really a shutdown. Then there is the haggling over this year's budget with $4 billion in spending cuts for two weeks and a $61 billion cut for the rest of the fiscal year.

Even my students who struggle with math can figure that with a federal budget of $3.8 trillion, our Congress is debating rounding errors. We all grow tired of hearing that seemingly all government spending is somehow essential. Then comes the report from the Government Accountability Office that the federal government is replete with duplicative programs (as if we didn't know this already) wasting at least $200 billion.

At a minimum, members of Congress should propose eliminating all duplicative programs. Then the real job should begin. I think that a modest proposal should be to not raise the debt ceiling. Currently the ceiling is set at $14.294 trillion and government spending has pushed the debt to only around $150 billion less than the cap.

Estimates are that government borrowing will hit the ceiling around April 15 - the irony of it all. What Congress always has done in the past is to raise the ceiling and has done so at least 77 times just so it can keep spending. The "ceiling" was intended to limit government spending by limiting the amount it could borrow.

Allowing the ceiling to rise is fiscal irresponsibility. Of course, there are those who always want to spend more and who forecast doom and gloom. Two of the administration's spokesmen, Treasury Secretary Timothy Geithner and chief economist Austan Goolsbee, have warned that a failure to raise the ceiling would precipitate an economic crisis with catastrophic effects on the economy. However, I have found few statements by either that are trustworthy.

No crisis would occur. The United States would not default on its obligations. April 15 reminds us that the government still will be receiving monies that can be used to pay on the existing debt. U.S. Sen. Pat Toomey, R-Pa., recognizes this and has introduced legislation to that effect. What not raising the ceiling actually means is that the Treasury could no longer borrow additional funds to cover expenditures appropriated by Congress.

Unlike American households who have a budget constraint, despite the debt ceiling Congress does not.

Congress was aware of the ceiling when it appropriated the expenditures in the first place and knew it would broach the limit. Yet it did it anyway knowing that the ceiling is symbolic and not real. Well, it is time we made it real. We have to get our fiscal house in order and the first step is letting the debt ceiling be the budget constraint for Congress. Just say no.

Dr. Harold Black is the James F. Smith Jr. Professor of Finance at the University of Tennessee. He may be reached at hblack@utk.edu.

Friday, March 4, 2011

Has anyone noticed how rapidly Obama is aging? It was the same with George Bush and Bill Clinton before him. Perhaps it is the weight of the office. However, it is not obvious to us that the aging has been due to any major decisions that have had to be made - unless no decision is a decision. First, the president sat idly by and let Nancy Pelosi and Harry Reed dictate his agenda. He let the democratic leadership initiate and write all the major pieces of legislation while sitting on the sidelines. Then after the legislation was crafted, he adopted them as his own and gave endless speeches upon speeches. He did this for health care, cap and trade and financial reform never taking the leadership on any. He did the same when the Bush tax cuts were expiring choosing to let the Republicans take the initiative and then crafting a compromise that could get past enough democrats for passage. Now that the Republicans control the House, he is again sitting on the sidelines. Here is the first major opportunity lost for this year. The debt commission co-chaired by Erskine Bowles and Alan Simpson gave the president cover. Yet instead of bringing a fiscal 2012 budget to the congress that incorporated the recommendations of the commission the president's budget maintains the unacceptable status quo. Why doesn't the president or the president's advisors recognize that instead of giving lip service about moving to the center, the president would have enhanced his re-election chances if he introduced a budget that showed an indication to deal with federal spending and the deficit? He could have said, I do this with reluctance but as I have said "federal spending is on an unsustainable path so I have adopted the commissions recommendations". The second opportunity lost was to embrace the GAO's report on government duplication. This is really puzzling since the president had given a speech the month before on government waste and duplication citing the number of agencies involved in the regulation of salmon. One agency dealt with them in salt water. Another agency dealt with them in fresh water and several others were also in the food chain. This was the chance to say that the GAO gave credence to a recommendation to cut $200 billion in spending by eliminating overlaps. This would shift the focus from the president to others and lessen the pushback by special interests but again an opportunity lost. The third opportunity lost is with the embarrassing lack of leadership in the middle east. The state department and the White House have uttered conflicting statements, retrenched, put their fingers in the wind to see what their statements should be that day. Instead of having a well thought out plan, they have seemed like rank amateurs. The fourth opportunity lost has been in not responding to the run up in gas prices due to the middle east. The president could have come out and said "we will lessen our dependence on foreign oil." Yes the president is a greenie weenie choosing to focus on "renewable" energy sources - whatever that means. But those sources are all much more expensive than fossil fuels. It seems that the president wants gas prices to go up to the point where other energy sources become competitive. This is ass-backwards. Rather he should adopt a strategy of all in: alternative fuels yes but also full exploitation of American oil, gas and nuclear. As modest proposal would be to have the vast majority of our electricity from coal and nuclear freeing up oil for transportation. Instead we are poorly led and the president is poorly advised. If he is being advised differently and chooses another course then that is another matter. However, given the statements from those in the administration, it seems to me another repeat of the amateur hour we saw with Jimmy Carter.

About Me

Harold A. Black is professor emeritus in the Department of Finance, University of Tennessee, Knoxville having retired after 24 years of service. He has served on the faculties of American University, Howard University, the University of North Carolina - Chapel Hill and the University of Florida. His government service includes the Office of the Comptroller of the Currency and as a Board Member of the National Credit Union Administration. He also has served on the boards of directors Home Savings of America and its parent company, H. F. Ahmanson & Co., Irwindale, California prior to its merger with Washington Mutual Savings Bank, on the board of New Century Financial Corporation, Irvine, California, then the nation’s largest real estate investment trust and as director and later chairman of the Nashville Branch of the Federal Reserve Bank of Atlanta. He writes an occasional article for the Knoxville News-Sentinel at http://www.knoxnews.com/staff/dr-harold-black/. His web page is haroldablackphd.com